Credit Bureaus have been a bedrock of the financial services industry for decades. Their insights on a consumer’s creditworthiness and willingness to repay a loan have proved their value a hundred-fold over the past 50 years. However, their ability to measure the creditworthiness of all persons is limited due to various reasons from the lack of reporting to the bureaus to the rapidly changing ways consumers conduct payments and other financial transactions and the explosion of non-traditional financial organizations.
A combination of innovation, technology, and immigration patterns and processes have changed how many in the United States are employed and receive income. Over the past few decades, these changes have left many consumers unable to get the crucial capital needed to buy homes and get approved for loans or credit, regardless of their steady income and consistent payment history for lifestyle-related expenses.
Alternative Data For Credit Decisioning
The Consumer Financial Protection Bureau (CFPB) held a hearing in 2017 to review the use of alternative data for credit decisioning. The CFPB recognized the traditional system for reporting consumer credit included lending categories where the credit is provided by banks and financial companies that have mechanisms in place for record-keeping. By that definition, this excludes rent payment activity, which is a major payment area for millions of consumers across the United States. Learn more about the outcome of the CFPB hearing here.
The CFPB also recognized that alternative data would help to expand credit opportunities to consumers with little to no credit history. By leveraging alternative data, FI’s would create a broader financial profile on their customers through the combination of both traditional and non-traditional data sources including ACH, Debit/Credit cards, mobile phones, and the internet resulting in an improvement of creditworthiness reporting and accuracy.
Rise™ Provides Insight Into Non-Traditional Financial Data
Rise™ is an example of a new product by IFM that provides insight to non-traditional categories of financial activities helping FI’s to paint the clearer picture they have been looking for on consumer customers that may otherwise have fallen out of their lending radar. Rise™ reports on the customer’s various sources of income and the consistency of payments for debt categories including rent, utilities, membership payments, subscription payments, and more. In essence, Rise™ makes it easier for FI’s to receive intelligence about their customers without having to manage multiple large data sources or the categorization and reporting accuracy of their financial behavior.
To learn more about Rise, a new component of IFM’s Candela™ service, you can communicate with me directly at firstname.lastname@example.org.
For the past 20 years, Insight Financial Marketing, L.L.C., has provided financial institutions with customer insights from the analysis of customer financial transactions such as ACH, debit card, credit card, and wire data. These insights are typically leveraged to help deepen relationships with consumer and business customers and to strengthen customer insights that are ingested into data environments that are then leveraged throughout their enterprise. IFM solely analyzes an FI’s data and returns customer insights back to the FI client. IFM also complies fully with bank customer privacy policies which enable FI’s to develop products and services, using IFM data, that be launched across their customer base.
Rob Reale is an Associate Partner and National Sales Manager responsible for business development and sales at Insight Financial Marketing. Rob began working in the Mortgage Banking industry in 1990 and currently helps the financial service industry leverage unique and innovative solutions.